David Geffen says Hollywood's longtime most powerful talent agency has become "a pimple on [its owner's] ass," but the town's rivals and players (including Michael Ovitz) reveal the truth is far more complex in James Andrew Miller's new book 'Powerhouse: The Untold Story of Hollywood's Creative Artists Agency.'
For most of the past 40 years, Creative Artists Agency has been the most innovative, most influential and, yes, most feared talent agency in Hollywood. From its launch in 1975 by five young agents who broke from then-dominant William Morris, it ascended in the 1980s and '90s under Michael Ovitz, who perfected the packaging of clients — actors, writers, directors — into a single project and began representing nontraditional clients like Coca-Cola.
After the founders handed the agency to the so-called "Young Turks" in 1995, it diversified into sports, marketing and advertising. But now that dominance is under attack. Employing his signature oral history style, James Andrew Miller (Live From New York, Those Guys Have All the Fun) charts CAA's past, present and future with exclusive access to all the players. In this excerpt from Powerhouse: The Untold Story of Hollywood's Creative Artists Agency, the agenting business' top figures debate CAA's decision to sell a stake to private equity firm TPG Capital in 2010 (upped to a majority in 2014), its ongoing arms race with WME-IMG, the defection of 12 comedy agents to UTA and much more. — Andy Lewis
In the late 1980s and early '90s, it often had been difficult for competitors to make a case against CAA other than to say it was too big and clients got lost in the crowd. No longer. Since the merger of William Morris and Endeavor, the upgrading of UTA and ICM getting its managerial and financial houses in order, CAA-envy has dissipated. CAA can speak to leadership in many categories, but the agency's rivals — the now-massive WME-IMG and sundry smaller competitors — seem more than content, and each has developed its own narratives about why it's the place to be. The noteworthy result: To a degree undreamed of a decade ago, there are plenty of happy, well-dressed and extremely well-paid agents elsewhere around town, and that says a lot.
CAA now operates in the most competitive climate in its history, whether it elects to acknowledge that or not.
Ari Emanuel, Co-CEO, WME-IMG
Here was the turning point, the very end for them: About six or seven years ago, [President] Richard Lovett said, "We're going to represent everybody. We want 100 percent market share." It was like he took Studio 54 at its height — when you couldn't get in because it was so exclusive — and just said, "F— it, we're letting everybody in." Some people freaked out, but I said, "This is the greatest day of our lives! Do you understand this! This guy is taking Tiffany's and turning it into Sears. Hallelujah!" We have won because he doesn't understand what this business is about.
Look closely at CAA's revenues since its founding, and you will see a stream that has grown without interruption — even throughout 1995's upheaval, guild strikes and myriad changes across the entertainment industry. Its business, and that of some other agencies, can be likened to the proverbial iceberg: above water, movement on the client front; wins and losses at award shows; and hits or misses with product. But beneath the water line is a foundation of stability and predictability that often is underappreciated by those assessing the industry. Open just a few envelopes in the CAA mailroom more than three decades since the founders unfolded their card tables, and you would find commission checks from the Blake Edwards estate for his directing services on 10 back in 1979, along with checks for film and television projects involving hundreds of other clients. And that would be before you got to the bigger dollar pile from the Jurassic Park, Mission: Impossible and Back to the Future franchises, or ER, Dynasty, Melrose Place, 21 Jump Street and dozens more. Once an agency gets a foot in the door on a client's profit participation for a movie or television show or is the direct recipient of a percentage from a movie or TV package, there can be a long, long trail of money pouring in.
It had taken the Young Turks roughly five years to get their bearings following the massive upheaval of 1995. As they'd rounded the corner on a new century, it turned out Ovitz's explorations with advertising, investment banking and technology were prescient. The business was changing; new paths needed to be forged. Coincidentally, Lovett, Bryan Lourd, Kevin Huvane and David "Doc" O'Connor believed they had the foundation to grow both their footprint and the agency's range of representation, hence the move in the next several years into marketing, offices abroad and sports. But that was hardly enough. They wanted more. Since the company's founding in 1975, financing needs were largely limited and flowed from a straightforward line of credit at a local bank. Such borrowing was rarely used — even during the company's initial lean years — because the partners kept putting as much money back into the agency as they could. Through the decades, there had been minor teases with mergers, a few potential acquisitions and invitations to be acquired, but nothing got close to the serious stage.
The notion of seeking an outside investor in CAA was something that had been discussed for several years, and in 2010, the agency finally met the right bride: TPG Capital (the initials originally stood for Texas Pacific Group), one of the world's premier private equity firms. Talks between CAA and TPG began in March 2010. In October 2010, TPG acquired a 35 percent stake in CAA for $166 million. The deal valued the agency at nearly $700 million and included $500 million for future capital needs. Four years later, on Oct. 20, 2014, CAA raised an incremental $435 million of capital via a new debt financing and increased investment from TPG. The new investment increased TPG's ownership to 52 percent, with TPG again committing to fund additional equity for capital needs. The firm's increased investment marked the first time the agency was not majority-owned by its operating principals.
Jim Coulter, Co-Chairman, TPG Capital
When I first ran into CAA, my reaction was actually common wisdom that Hollywood agencies might be difficult to invest in, because they're people businesses, and maybe not great stewards of capital.
What surprised me is the deeper I looked, the more uncommon wisdom showed up, and things that I might have expected to be true weren't necessarily the case. In 2010, when we first looked at the company, their sports business was still new, still in start-up phase, and still in cash flow negative. We looked at that business and could say, "Here's something that represents a breakout opportunity for this business." Concert touring was a much bigger business than I would have expected from the outside, and the strength of the TV business was stronger than I would have expected. The stickiness of CAA's businesses and the resilience of their businesses were much stronger than I expected. The light went off for me that this is not only an agency; it is a content play because of their extraordinary access to a very large pool of content. As the value of content increases around the world, an investment in CAA would be the most diversified and interesting way to be in that marketplace.
David Bonderman, Co-Chairman, TPG Capital
We were intrigued by CAA because they're in the middle of the ferment that's going on in this industry, but they've been brokers instead of principals, and we think they have plenty of opportunities to be principals.
Bob Bookman, Former CAA Agent
David Bonderman spoke at the first retreat after they bought a minority interest in the company, and he was talking about all the things that TPG could do for us. The first example he gave was Ryanair. You know Ryanair, right? It's an ultra-low-cost European airline where once you buy your ticket, everything else is extra including using the bathroom. And he was saying, "We're trying to get regulatory approval on short-haul flights so that passengers can fly standing up," which obviously means so they can jam more people in, and I'm thinking, literally, at that moment, "He's confusing the agents at this company for passengers on one of his airplanes, not the aircrafts themselves."
The other example he used was some big hotel chain they bought, and he puts this diagram up about how they were maximizing the way housekeepers cleaned rooms. It looked like a Venn diagram done by Sol LeWitt, and I was thinking, "This is a metaphor for how we should be working, and if that's their mind-set going in, nothing good will come of this for me."
Jeremy Zimmer, CEO, UTA
On the day [in 2014] that Richard Lovett was announcing the second TPG investment from the conference room, I was getting texts by agents there — not any of the guys who came over, guys who still work there — telling me what he was saying. That would've never happened before. You used to call the CAA agents, they'd never call you back.
So far UTA has benefited a lot from ICM taking private equity in and then having them take private equity out. That caused massive dislocation; we picked up five or six great agents. The William Morris Endeavor merger was unbelievable for us. We picked up five or six great agents whom they literally threw out the door, and they paid them for years while they worked for us. It was f—ing fantastic. And then because of the CAA-TPG deals, we were able to get these 12 agents [who defected in 2014].
They're now minority partners in the agency. I had told them they didn't have to sell it to get cash. They could have factored the accounts receivable. The history of collections in agencies is well into the 90 percent that they get paid. It's a very good business in that regard. They could've gone to any factoring company to factor the receivables and not sell anything. Now they can't set their own salaries. They can't do a lot of things that they could do before. TPG is a giant, giant company, and CAA is like a pimple on their ass. It's not a significant amount of money to them. And they now control the situation there, so they can figure out how to get their money back.
Kevin Huvane, Partner, CAA
There's always been an alternative narrative, and there's always been people trying to tell our story. I can tell you that the TPG partnership has been a great one. They have never interfered with anything we have done. The reason they wanted to be in business with us is because they saw how well we've done and how well we run it.
Risa Gertner, CAA Agent
The TPG investment hasn't affected me in any way or on any day. And let me tell you, if it's not affecting my life, it's not affecting anybody's life. Anybody who says it's affecting their life is misdirecting something else that's affecting their life. They're misdirecting the blame.
Mark Shapiro, Chief Content Officer, WME-IMG
We don't see CAA as competitors. They're just not. What WME is now, with IMG, is a major content media company with revenues and profits that dwarf those of CAA. We are a much bigger and bolder organization, with over $2 billion in revenue and 50 offices in 30 countries. They have some great people over there — I particularly love the guys who run their sports division — but we are just in a different league, on an entirely different global scale. CAA is still focused on being the leader amongst Hollywood agencies. WME-IMG has transformed itself into a major media company. That's not a shot at CAA, it's just the reality of where the two businesses stand now.
Mike Rubel, Chief Operating Officer, CAA
We didn't spend $2.4 billion [WME's purchase of IMG] to buy more revenue and head count. Our goal is not to be the biggest; it is to be the most influential, integrated company in the world, focused on our strategic priorities. It perhaps goes without saying that IMG is in a number of businesses that we do not consider important in our game plan.
Chris Silbermann, Partner, ICM Partners
CAA's lost a lot of agents over the years. We talk to a lot of people there, and they are not happy. But some are afraid to leave. Whenever you're an agent and you move agencies, you can always lose clients. Some people there now worry about what they are going to be able to walk out of there with.
We may be smaller, but here at ICM, there's nowhere to hide. Here, everybody is close-knit, everybody works together, and if somebody's not doing something they're supposed to be doing for a client or a colleague, it's pretty obvious. You can hide your ass off at CAA. You can hide at William Morris. You can even hide at UTA. As a result, there are so many mediocre agents at those companies.
Jim Berkus, Chairman, UTA
We're all swinging at each other, no doubt, but what's different now is that people realize you can leave CAA and your world doesn't fall apart. Very few people are afraid to leave CAA now. If you're at CAA and getting what you want, fine, but if you're not, you're going to look at other places, and there are other places to go.
Sam Gores, Chairman, Paradigm
The bigger an agency gets, the more it loses a bit of its focus, and then one day it ends up as just another media business. Not that there's anything wrong with that, but I have always wanted us to be about our artists, not our businesses. I believe that's our competitive edge. What I get from our guys who used to be at CAA is that they were done there because the culture is not what it used to be. Here we don't shove a culture down anybody's throat.
Peter Benedek, Board Member, UTA
There's a theory, and I think there's a lot to it, that the only agents over there who are really competent, really excellent at their jobs, are the ones who were directly touched by the guys who founded that agency. So if you hadn't worked for Mike Ovitz, Ron Meyer or Bill Haber, you're probably not the greatest.
David O'Connor, Former Partner, CAA
I love Ari. He's a twisted f—, but I get a kick out of him. I sat next to him at the Saturday Night Live 40th anniversary celebration and we had quite a few laughs, and I've always liked Patrick [Whitesell] too. I was sorry to see Patrick [leave CAA and go to Endeavor], but I always felt he had done the right thing for Patrick. It worked out pretty well for him.
Patrick Whitesell, Co-CEO, WME-IMG
What's wild to me about CAA is when I left there and Ari and I were at Endeavor, it was like a knife fight. They tried to kill us every day, and we were just in the movie and television business. But once we did the WME merger, I stopped thinking about them the way we did. It used to be, "How do we beat them?" Now we don't even have to think that way.
There's no secret we've had some run-ins with CAA recently. We brought a bunch of people over here, and now the gloves are off. I've known Bryan Lourd and Richard Lovett forever, we have a lot of social friends in common, and it's all friendly and jocular when you're together, but there's no question we're fiercely competing with each other.
I was at the Star Wars premiere with my client Harrison Ford and got up to talk to another one of my clients, and by the time I turned around, Richard and Bryan were on either side of him, talking to him and laughing. I moseyed over to them and just said, "Hi, guys!" — joined the conversation and eventually they left. Harrison gave me a look when they got up … he knew.
Martin Lesak, Former CAA Agent
So you have that incredible beginning in the first couple of years when you drink the Kool-Aid, and you're made to feel everything is laid out so perfectly. There's a lot of talk about culture and how everyone has to treat each other. But then that starts to get stripped away, and eventually you see what the reality is.
There was definitely also a curiosity factor there. Every agent at every other agency has at one time or another wondered what it was like to work at CAA — to play for the Yankees, so to speak — to know what it was really all about, if it really was this exalted thing. I'm not sure people do that as much now, but 10 years ago, if an agent said they weren't curious, it probably wasn't true. You could say they're still the Yankees, but look what's happened to that team.
Adam Venit, Former CAA Agent
John Boyega is the lead of Star Wars. He left CAA with Star Wars coming out to come to [WME]. You ask, why would he do that, and it's because they fell asleep at the wheel. They weren't doing their job. They don't work as a team anymore. He was living in London where there were three or four directors there. I asked John if he had been talking to them, and he said he didn't even know the directors were there. The CAA agents never called him. Because they don't work as a team anymore, so they're not communicating. I think their time is done.
On Feb. 29, 2012, Dan Aloni suddenly exited the CAA fold. After joining the agency out of UTA in 2005, Aloni experienced several rocky relationships inside CAA that really never improved. At the time, Aloni's top client, Christopher Nolan, was directing and producing big-budget projects, including Inception, the Batman trilogy and Man of Steel, and would follow Aloni to WME.
Richard Lovett, President, CAA
My highest priority is culture, and our culture is defined by the way we treat each other. We prioritize our work in support of colleagues. We have each other's back, and, of course, don't work at counter-purpose with colleagues. I believe that the culture of our company is our most important differentiator; the reason our work for clients in every area is best in class. The culture of the company has a way of ejecting those who don't fit. I had many conversations with Dan, but he was never able to change his behavior.
Dan Aloni, Former CAA Agent
I left because they fired me. They tried to discredit me. They put several people I worked with under contract at the company for more money. They tried to sideswipe me.
Richard Lovett had tried to force me into running the motion picture department with Risa Gertner and Todd Feldman. I had regular meetings with them and Richard about the department. I also had a meeting with Richard every week for five years. To my knowledge, I was the only person in the motion picture department to do so. We met about management of the department: who was doing well or not, packaging movies, signing of potential clients and the culture of the department. I was very honest with Richard repeatedly about how I felt that a lot of things weren't working. Too much favoritism from the people who were running the department. I told him that consistently for a long time.
Since they sold a majority of the company, a lot of people there are realizing it's not going to raise all boats. I give Mike [Ovitz] and Ronnie [Meyer] a lot of credit. Even when they had all those consulting fees from Matsushita and others coming in, they made sure to share it with everyone. There was a feeling that everyone was going to be elevated financially. Now there's just too many people over there who believe it's just about those three guys [Lovett, Lourd and Huvane]. Here, Patrick and I made sure that the people who have been with us all get checks. We know we wouldn't be here without them.
Jessica Tuchinsky, Former CAA Agent
It all changed. If Richard came to me when I was then an agent in 1998 or 1999 and said, "I've got a meeting this week with Tom Hanks, drop everything you're doing and give me the 50 best screenplays or the 10 best movies or a list of Paramount go projects," whatever he needed for Tom Hanks that week, even though I wasn't being paid for working with Tom Hanks, I would have dropped everything I was doing for all of my clients and I would have helped Richard put together that list. That's because I was old-school. If you work at CAA now and Richard asks for the Tom Hanks list, I can't imagine anyone doing it today.
It's a very complex time right now in our industry and there are many different weather patterns happening. The theatrical movie business is changing; streaming services are evolving; and the entire underlying revenue structure is up for grabs. No one really knows how it's going to sort out.
They get punched in the nose now, and they freak out. If you punched Mike Ovitz in the nose, he would spend the rest of his life f—ing killing you.
The momentum has totally changed. Ari has an incredible business now. He and Patrick have close to 5,000 employees producing for them across dozens of countries. CAA has gone from the dominant No. 1 to a market where owning the film business is no longer the goal or the road to the victory stand. Today, diversification and scale create competitive advantage, and because of that, Ari is now running a worldwide company that is clearly the team to beat.
We have seen the same individual competitors for more than three decades. They have started new agencies, they have gotten smaller, they have merged to get bigger, they have gone out of business. In the meantime, we have been consistent in our culture and clear about our game plan and strategy. The result has been that we are the leader in all categories in which we compete. Because no one has been able to compete well in the movie area, other agencies, understandably, spend a lot of time emphasizing television as an area where they have had success. Yet CAA, by every measurement, remains the clear leader in television — in terms of client success, showrunners, executive producers, writers on series — plus, helping put together the shows that define pop culture, including the top-rated show on broadcast, Empire; the top-rated show on basic cable, The Walking Dead; and the top-rated show on premium cable, Game of Thrones.
From Powerhouse: The Untold Story of Hollywood’s Creative Artists Agency by James Andrew Miller. Copyright © 2016 by James Andrew Miller. To be published on Aug. 9, 2016, by Custom House, an imprint of HarperCollins Publishers. Excerpted by permission.
This story first appeared in the Aug. 5 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.